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Commercial Activities In Garments : What Is Letter Of Credit : A Close Look ___

IN Order to know about the commercial activities at first we have to know that what is Letter of credit . A letter of credit is a document issued by a financial institution, or a similar party, assuring payment to a seller of goods and/or services. The seller then seeks reimbursement (compensation paid to someone for damages or losses or money already spent etc. ) from the buyer or from the buyer's bank. The letter of credit also insures that all the agreed upon standards and quality of goods are met by the supplier.

Letters of credit are used primarily in international trade for large transactions between a supplier in one country and a customer in another. The most important things about Letters of credit is that almost all letters of credit are irrevocable, (i.e., cannot be canceled without the consent or Permission of the beneficiary, issuing bank, and confirming bank, if any.)

Master L/C :
Generally we know that the procedures of master L/C is :

It goes Buyer To Supplier . ( Buyer

Supplier )

Back To Back L/C :


It goes Supplier To Sub-Supplier . (Supplier Supplier )

Back To Back L/C Flowchart :

BTB FLOWCHART
DHAKA BANK PRIME TEXTI LE LTD RUPALI BANK VAI MUNNA GARMENTS UBL DHAKA SUPPLIERS FABRICS BANK SUPPLIER LC ISSUING BANK/ NEGOTIATING BANK 2 ND BENEFICIARY/ EXPORTER TRANSFERRING BANK

ZXY Buying

SCB DHAKA

AMEX NEWYORK

JC PENNY

FIRST BENEFICIARY

ADVISING BANK

LC ISSUING BANK

BUYER/ APPLICANT

Essential Short Terms :


Proforma Invoice : Also Know As PI . When We open the L/C , it is mandatory for a supplier to complete PI and give it to the buyer Either E-mail or Personally .

Purchase Order :
Also Known as PO . When we confirm the order from the buyer , buyer will give a PO to Supplier . And the most important things is For Single delivery (whole Garments) , Buyer gives Just single PO . But , if we request double or multiple delivery , then buyers will give multiple PO ( Each PO For Single Delivery) .

Trans Shipment:

Two ways Of Trans Shipment -------1. Sea (vessel ) and 2. Air way

Generalized System Of Preferences (GSP)


The Generalized System of Preferences (known as GSP for short) is a scheme whereby a wide range of industrial and agricultural products originating in certain developing countries are given preferential access to the markets of the European Union. Preferential treatment is given in the form of reduced or zero rates of customs duties. The GSP scheme is specifically designed to benefit certain developing countries and integrate them into the world economy.

What Countries are eligible To Benefit Under GSP :


Three distinct categories of countries can benefit under the GSP scheme provided the goods are produced in accordance with the relevant rule of origin

Developing countries/territories enjoy preferential access to EU markets Least developed developing countries (LDDC) benefit from zero duty on import into the EU for all products of Chapters 01- 97 with the exception of Chapter 93.

Special incentive arrangement for sustainable development and good governance - GSP+

Documents Required For Exports:

1. Companies Trade License ( Given By City Corporation ) 2. Certificate Of Incorporation ( If The companies share is Joint or Joint venture Company Then It Is Needed ) Given By --- RJSC ( Registered Joint Stock Comapany ) 3. Memorandum Of Association (Given By --- RJSC ( Registered Joint Stock Comapany ) 4. TIN (Tax Identification Number) Certificate ----- NBR (National Board Of Revenue) 5. Banks Current Account 6. Membership Of BGMEA , BKMEA , DCCI , BGBA . 7. ERC ( Export Registration Certificate) ---- Office of the Controller Of Export & Import. 8. VRC (vat Registration Certificate) ---- Customs 9. EXP ( Export Permission) ---- Bank 10. UD ( Utilization Declaration) Form

Documents Required For Import:


1. Companies Trade License ( Given By City Corporation ) 2. Certificate Of Incorporation ( If The companies share is Joint or Joint venture Company Then It Is Needed ) Given By --- RJSC ( Registered Joint Stock Comapany ) 3. Memorandum Of Association (Given By --- RJSC ( Registered Joint Stock Comapany ) 4. TIN (Tax Identification Number) Certificate ----- NBR (National Board Of Revenue) 5. Banks Current Account 6. Membership Of BGMEA , BKMEA , DCCI , BGBA . 7. IRC ( Import Registration Certificate) ---- Office of the Controller Of Export & Import. 8. VRC (vat Registration Certificate) ---- Customs 9. IMP ( Import Permission) ---- Bank 10. UD ( Utilization Declaration) Form ^^^ BGMEA Bangladesh Garments Manufactures And Exporters Association. BKMEA Bangladesh Knitting Manufactures And exporters Association . DCCI Dhaka Chamber And Commerce Industry . BGBA Bangladesh Garments Buying House Association.

***** Bond License : For Import Of Raw Materials ( Tax free) ***** Form C : If The Money that buyer gives to the correspondent Supplier crossed to 2,000 dollar , Then Form C Must BE filled up In order to occur any harmful activities against our laws But At present , Now the range is Up to 5,000 Dollar